Saturday, December 6, 2008

Hard Times, They Are A-Coming...

A couple of depressing links from Yahoo!Finance:
The job market took an especially brutal turn last month, with employers slashing their payrolls by 533,000 jobs--a figure that sailed above economists' expectations of 320,000 jobs lost. The Labor Department also revised its employment numbers for October and September to show an additional 199,000 jobs lost over the two-month period.
and this one (are you reading this, Mackay?):

The rising cost of college -- even before the recession -- threatens to put higher education out of reach for most Americans, according to the biennial report from the National Center for Public Policy and Higher Education.

Over all, the report found, published college tuition and fees increased 439 percent from 1982 to 2007 while median family income rose 147 percent. Student borrowing has more than doubled in the last decade, and students from lower-income families, on average, get smaller grants from the colleges they attend than students from more affluent families.

One economic bubble that hasn't gotten much attention is the "education bubble." It actually has a lot in common with the housing bubble: it is driven by easy credit, as much tuition is financed through student loans, frequently at subsidized rates, it has its own government-sponsored lending agency, Sally Mae, to fan the inflationary flames with even more easy credit, and it is absolutely rife with emotionally driven subsidy, from Pell Grants to scholarships to ethnic subgroup sponsorship, etc. Whatever one might think about the value and legitimacy of these efforts, one conclusion is inescapable: they funnel ever larger quantities of money into a single market, and the effect is to drive up prices and fuel a bubble. Pricing is like an auction: when lots of people show up with loads of money in their pockets, prices of the items sold go up. When few people show up with less money in their pockets, and competing needs to consider, prices have to stay moderated. It doesn't matter that there is "competition" in education, the fact is that prices go up when they can go up; that's the ugly truth of monetary inflation. If colleges can raise tuition, rest assured that they will. What was all that about financial aid making college "more affordable?" But I digress... For those of you who don't eat, drink, breathe and sleep economics data, 500,000+ jobs lost in one month is staggering. I believe you'd have to go back to 1974 to find a number that large. The population is now much higher than in 1974, so percentage-wise, that's a smaller drop. But still. Naturally, high unemployment and tighter budgets is going to put a crimp on what people are willing to pay for most things, and "education" is no exception. Of course, people will interpret this backwards, saying there's "not enough money" for school and all those other things, but naturally this is not the case. After all, money can simply be printed, right? Or education subsidized?! Stop me! But this is actually the standard backwards way of looking at economics, and of course it leads to erroneous conclusions and intellectual dead ends. We think, "People just don't have enough money. If they could just get it, things would be okay. They just need jobs. If the economy were better, they would have jobs. What the economy needs is more consumer spending. But there's not enough consumer spending because people don't have jobs." In other words, we start chasing our tails. "All we have to fear is fear itself, right?" Then we think "We need government to intervene, you know, to break the cycle. But wait, if we just printed the money, that would lead to inflation, and inflation is bad, right? Maybe we could just put people to work, you know, doing things. But if these were the right things to be doing, wouldn't the free market have started them long ago? So this must not be the right approach, but I can't say for the life of me what is... Somebody help me! Do something!" Once again, my advice: forget about the money. It just confuses things. Think about the stuff. Wipe money out of the picture, and you will arrive at some profound, hard to stomach truths. Recessions are the events that bring those truths to light, and force us to look at hard facts we had been papering over through years and years of cooking the books with monetary inflation, fractional reserve banking, and government meddling, especially in the form of subsidies. So here's my analysis... The reality is, our economy is sagging under an overload of consumption and useless activity. The skyrocketing tuition racket is a prime example. The assessment of "too little money as a result of recession" is really an indication of too little production for the lifestyles Americans are trying to sustain. The US is really quite a productive society. Sadly, it is not productive enough to allow us to house all our poor and uncreditworthy individuals in suburban McMansions, AND allow our 18-25 year olds to spend 5-6 years (10% of their useful, productive lifespans) binge drinking and attending perpetual orgies, ahem, "in college," which is a euphemism for getting the education they didn't get in K-12 public schooling, or rather not doing so as the case may be, AND drive 8 mpg 4X4 land yachts in a 2 hour daily commute, AND liberate the Muslim world from the Muslim world, etc., etc., etc., ad infinitum. Printing money and running up deficits makes it look like we can do all these things without really working all that hard...for a while. But recession setting in is telling us otherwise, and now we are finally realizing just how stupid we have been with our wealth and our time and our precious resources. Recession set in, as I have written before, precisely because the Fed stopped printing the money (AMB, remember the AMB, flat for 2007) that kept the whole boondoggle afloat. Now we are seeing the problem we have on our hands for the first time in a long time. The fact is, America is just plain out of control. It has been for a while. We really needed this recession. A recession is a time for people to step back, look at the last ten years, and think, "what the hell were we thinking? We've gotta make some changes." I think most of the population not attending college would definitely be a change for the positive. Seriously, if you really want to learn, everything you ever wanted to know is now at your fingertips. Its called The Internet, and for ~$40/month, you can get blazing-high-speed access, which is a lot less than the cost of a semester's worth of booze, prophylactic, and the accompanying tuition. You can learn all you want, for next to nothing! What a deal! Ahh, but that's not really the point, now is it? You wouldn't get a "degree" with that internet subscription, would you? And let's be honest, those kids didn't really want to learn anything in the first place, did they? They just wanted to go to college, and then graduate and do, well, something, getting paid more than if they hadn't gone to college. Therein lies the biggest problem with higher education. That, and complicit faculties and parents who are willing to let things degenerate to this point and still just try to muddle through without making the hard changes necessary to make things work. They don't care. Their actions show it. If they did, they would "do something" and probably get fired (or more than likely, not get hired in the first place), or quit and leave the job to other people who don't care. The parents who do care homeschool their kids. They don't send them off to government handlers. Furthermore, we can't have our children wasting their childhoods in public schools that don't teach them anything, then expect them to go out into industry and be productive enough to sustain $250K houses and $50K cars. This is by far the bigger waste. 12 friggin' years, and we routinely graduate functionally illiterate people. These are the people who are going to run industry, and develop the products of future generations? These are the people who will outcompete the Chinese? Yet few raise enough of a stink about it for anything to happen. I suppose we all have more important things to do, like make money to pay the cable bill so we can find out about Britney Spears' latest antics. That's the real problem with education: it is a bloated morass of students who don't want to learn, coupled with teachers, parents, and faculty who are willing to make that happen, for years and years on end. The larger problem: we want the lifestyle, not the baggage. We now can't afford college as a nation because we're too irresponsible to manage our finances, and college is a waste anyway because we're too irresponsible to make it work, and the reality is, with our sagging economy apparently in a death spiral, people probably won't need that education anyway. It's fleas on fleas on fleas on fleas. Responsibility and discipline, that's for the birds. This is America, dammit! I want my MTV! To rip off somebody-or-other's quip: the problem with America, it seems, is that it is full of Americans. This is not an economic problem. Its a cultural problem. Its an ethical problem. It has to end, or our comfy lifestyles will. So on the whole, its probably a good thing that people won't be able to afford college, if that actually happens. I hope I've demonstrated that its a massive waste of time and resources anyway. It would be a good thing, on the whole, if we as a country rethought this whole business. But alas, it seems that most folks don't want to see that. I see little "change," much "bailout" on our horizon. We aren't concerned with fixing things so much as making them work. See the difference? Those looking to Washington for answers do so in vain. Washington only regurgitates what the populace wants to hear, and rams down its collective throat what it thinks it can get away with. Expect more problems out of Washington, not solutions. The solutions to cultural problems are not top down, they are bottom up. One of these days, I'll write a post about real, practical things I think average people could do on their own time with their own money to help make things at least a little bit less bad. Alas, I've got more whinin' to do right now. This post got me so worked up it degenerated into an scathing and completely unstructured tirade. This is not what I intended to produce when I started writing. In the future, I'll have to do better. Seems even I need a bit of that discipline! Conclusion: expect things to get worse. This one could very well be the end of us.

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